It was such an interesting quarter to look back at data in particular CPU strength, not just accelerators. Strong outlook on accelerators. Gaming PC. And then some concern about the future of the China business. But Caroline and I have talked for quite a while now about AMD as the best performing chip stock so far this year. I want to start by just asking what in the quarter changed for AMD? What was the biggest move forward, do you think?
Yeah, absolutely. So, first of all, Ed and Caroline, great to be here with you. We always look at these things and say, when we have a business where all of our businesses are actually performing extremely well, it's a good place to be. So we had a very strong first half of the year, second quarter up 32% year over year. We're guiding to a third quarter of 28%. And underneath that, what you see is, first of all, data center business is doing extremely well. Our server CPUs are continuing to gain share in cloud and in enterprise. One of the things that we're seeing with AI is the AI investments from the largest hyperscalers are actually pulling both CPU and GPU revenue, which is good for us overall. AI requires lots and lots of compute going forward. We're also seeing strength in PCs as well as gaming. Our products are extremely well positioned, whether you're talking about consumer or commercial. And then we're also seeing some improvement in the embedded side of our business. As you know, that is also going to return to growth in the second half of the year. So we've seen a lot of positive signals over the last 90 days in terms of what the market now needs from computing and the investment in things you have there. There are some questions about China, of course, which we can certainly talk about.
Well, let's talk first about the accelerator outlook, because actually from analysts to investors to the developer community, when we say that you're coming on the show, we get questions from all quarters. You had said that the accelerator business will grow to the tens of billions. And what I'm kind of seeing is people just want granularity from Lisa a little bit like when does that happen and where does it happen? And you talked about the hyperscalers, but what's the growth pathway to tens of billions in accelerator revenue?
Yeah, absolutely. Ed, let me give you a few important markers. So what we said is the second half of the year, our growth would be primarily driven in the data center by accelerators. We launched a new product just in June, the MI 355 product, it's extremely competitive. We really like how we stack up in terms of total cost of ownership for inferencing and training workloads. Customers really like that product, that's driving some of our second half growth. And certainly when we talk about our sequential growth into Q3, that's being primarily driven by that accelerator capability. And now when you extend forward, I've said that the AI TAM for accelerators in data center will be over $500 billion over the next couple of years. We expect to get a large portion of that new accelerator TAM, and that's how we get to tens of billions of dollars. Very key is also we've accelerated our roadmap and so we are on an annual cadence. And next year we'll have a new capability with our MI 400 series, which will bring full rack level solutions, which will be another giant step forward in terms of capability for AI solutions. So I think that's the roadmap and path for the next couple of years. We're really excited about the traction. We're getting lots of customer validation saying, hey, you're on absolutely the right path. And we're making strong progress towards those goals.
Lisa, the granularity that was demanded time and time again on that earnings call with analysts was around China, though. And I know it's so hard to give because in many ways, as MI 308 is dependent on the licenses from the US government, how are those discussions going with the US government? How quickly do you think they can get through the backlog?
Yeah, Caroline. Definitely. Look, I know people always want precision, and what I will give you is exactly how things are playing out from our standpoint. I think we've seen an improvement over the last 90 days. 90 days ago, we did not expect to be able to ship to China because of some of the regulations. I think this administration, the Department of Commerce, the government has actually been very open to trying to find the right balance between national security and ensuring that we have US AI technologies proliferated across the world. So we think that's a great balance. We now know that we have a number of licenses that are under review. We've been given good indications that those are moving through the review process and we will certainly inform everyone when the licenses are granted. But given that it's hard to predict exact timing, just given all of the things that are in front of the government at the moment, we thought the right thing to do right now is just say, hey, let's not include that in the third quarter revenue. But even with that, we're growing 28% year over year, which is a fantastic growth rate. And if you asked me what we've learned in the last 90 days, we've learned that the demand is even stronger in the second half of the year than we necessarily thought maybe just a few months ago.
And analysts really cooperated and thought it was right that we should see such caution perhaps, and not show up in the numbers. But, Lisa, I'm interested in the inventory that you had been very clear about, the $800 million knock on the fact that you couldn't access China for a while. I know that manufacturing hadn't been complete, but do you think you can unwind that $800 million? How much do you think you can bring that back to bear?
Well, we certainly expect that once licenses are approved, that we will restart our supply chain and get those in place. We do have a bit of time that it takes to complete those, but we would expect to be able to ship some of those products as licenses are approved. And again, the exact timing will depend on when licenses are approved. But again, I would hope that we don't get caught up in something that I would say is moving actually in the right direction and really see the overall business is doing extremely well. When I look at data center growth, when I look at client and gaming growth and really the return to growth in the embedded, those are the key aspects to really understand about where the business is today.
Lisa, the final question that we have on China, if I may, is something that we've also discussed quite often with Nvidia and Jensen Huang, which is the idea that in the interim period you just outlined, China's domestic chip makers have made some progress on their own accelerators. Does AMD make an assessment of that, of how performant the comparable Huawei or other Chinese accelerator is relative to the MI 300 family?
